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    Associated Bank v. CA

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    Namiel Maverick D. Balina
    Associated Bank sued Lorenzo Sarmiento Jr. to collect on a promissory note he signed in favor of Citizens Bank and Trust Company before they merged, with the Supreme Court ruling that as the surviving corporation, Associated Bank had the right to enforce the note. The Court also held that the note was not a "contract pour autrui" meant to benefit a third party and that consideration had been received, as evidenced by partial payment.

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    Associated Bank v. CA

    Uploaded by

    Namiel Maverick D. Balina
    42 views2 pages
    Associated Bank sued Lorenzo Sarmiento Jr. to collect on a promissory note he signed in favor of Citizens Bank and Trust Company before they merged, with the Supreme Court ruling that as the surviving corporation, Associated Bank had the right to enforce the note. The Court also held that the note was not a "contract pour autrui" meant to benefit a third party and that consideration had been received, as evidenced by partial payment.

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    Associated Bank sued Lorenzo Sarmiento Jr. to collect on a promissory note he signed in favor of Citizens Bank and Trust Company before they merged, with the Supreme Court ruling that as the surviving corporation, Associated Bank had the right to enforce the note. The Court also held that the note was not a "contract pour autrui" meant to benefit a third party and that consideration had been received, as evidenced by partial payment.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    42 views2 pages

    Associated Bank v. CA

    Uploaded by

    Namiel Maverick D. Balina
    Associated Bank sued Lorenzo Sarmiento Jr. to collect on a promissory note he signed in favor of Citizens Bank and Trust Company before they merged, with the Supreme Court ruling that as the surviving corporation, Associated Bank had the right to enforce the note. The Court also held that the note was not a "contract pour autrui" meant to benefit a third party and that consideration had been received, as evidenced by partial payment.

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    © All Rights Reserved
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    G.R. No.

    123793 June 29, 1998

    Associated Bank v. Court of Appeals

    MAIN TOPIC – Contracts – Stipulations in favor of third persosn (Stipulations pour autrui)

    I. FACTS:
    1. Associated Banking Corporation and Citizens Bank and Trust Company (CBTC) merged to form just one banking
    corporation known as Associated Citizens Bank (later renamed Associated Bank), the surviving bank.

    2. After the merger agreement had been signed, but before a certificate of merger was issued, respondent Lorenzo
    Sarmiento, Jr. executed in favor of Associated Bank a promissory note, promising to pay the bank P2.5 million on or
    before due date at 14% interest per annum, among other accessory dues. For failure to pay the amount due, Sarmiento
    was sued by Associated Bank.

    3. Respondent argued that the plaintiff is not the proper party in interest because the promissory note was executed in
    favor of CBTC. Also, while respondent executed the promissory note in favor of CBTC, said note was a contract
    pour autrui, one in favor of a third person who may demand its fulfillment. Also, respondent claimed that he received
    no consideration for the promissory note and, in support thereof, cites petitioner's failure to submit any proof of his
    loan application and of his actual receipt of the amount loaned.

    4. RTC ruled in favor of the plaintiff which was reversed by the Court of Appeals, hence the petition.

    II. ISSUE/s

    1. Whether or not Associated Bank, the surviving corporation, may enforce the promissory note made by private
    respondent in favor of CBTC, the absorbed company, after the merger agreement had been signed, but before a
    certificate of merger was issued?
    2. Whether or not the promissory note was a contract pour autrui and was issued without consideration?

    III. HELD

    1. The Court held that the petition is impressed with merit. Associated Bank assumed all the rights of CBTC. Although
    absorbed corporations are dissolved, there is no winding up of their affairs or liquidation of their assets, because the
    surviving corporation automatically acquires all their rights, privileges and powers, as well as their liabilities. The
    merger, however, does not become effective upon the mere agreement of the constituent corporations. The Securities
    and Exchange Commission (SEC) and majority of the respective stockholders of the constituent corporations must
    have approved the merger. (Section 79, Corporation Code) It will be effective only upon the issuance by the SEC of a
    certificate of merger. Records do not show when the SEC approved the merger.
    But assuming that the effectivity date of the merger was the date of its execution, we still cannot agree that petitioner
    no longer has any interest in the promissory note. The agreement itself clearly provides that all contracts —
    irrespective of the date of execution — entered into in the name of CBTC shall be understood as pertaining to the
    surviving bank, herein petitioner. Such must have been deliberately included in the agreement in order to avoid
    giving the merger agreement a farcical interpretation aimed at evading fulfillment of a due obligation. Thus, although
    the subject promissory note names CBTC as the payee, the reference to CBTC in the note shall be construed, under
    the very provisions of the merger agreement, as a reference to petitioner bank.

    2. No. The Supreme Court held that it was not a contract of pour autrui. In a contract pour autrui, an incidental benefit
    or interest, which another person gains, is not sufficient. The contracting parties must have clearly and deliberately
    conferred a favor upon a third person. The "fairest test" in determining whether the third person's interest in a contract
    is a stipulation pour autrui or merely an incidental interest is to examine the intention of the parties as disclosed by

    Ponente: Panganiban, J.

    Digest Maker: Balina, Namiel Maverick


    G.R. No. 123793 June 29, 1998

    Associated Bank v. Court of Appeals

    their contract. It did not indicate that a benefit or interest was created in favor of a third person. The instrument itself
    says nothing on the purpose of the loan, only the terms of payment and the penalties in case of failure to pay.
    Private respondent also claims that he received no consideration for the promissory note, citing petitioner's failure to
    submit any proof of his loan application and of his actual receipt of the amount loaned. These arguments deserve no
    merit. Res ipsa loquitur. The instrument, bearing the signature of private respondent, speaks for itself. Respondent
    Sarmiento has not questioned the genuineness and due execution thereof. That he partially paid his obligation is itself
    an express acknowledgment of his obligation.

    IV. DISPOSITIVE PORTION

    WHEREFORE, the petition is GRANTED. The assailed Decision is SET ASIDE and the Decision of RTC-Manila,
    Branch 48, in Civil Case No. 26465 is hereby REINSTATED. SO ORDERED

    V. DOCTRINE/LAW

    Stipulation pour autrui (poor oh-troo-ee). [French “for other persons”] Civil law. A contractual provision that benefits
    a third party and gives the third party a cause of action against the promisor for specific performance. 

    Ponente: Panganiban, J.

    Digest Maker: Balina, Namiel Maverick

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